What Actually Happens at a Real Estate Closing?

A real estate “closing” is the event where parties meet in order to consummate a real estate transaction. At a typical real estate closing, where one party is selling real estate to another, the parties who will attend the closing consist of the sellers and their lawyer, the buyers and their lawyer, the bank's attorney, the title closer, and one or more real estate brokers

If the purchase is being financed, there are actually two transactions that occur simultaneously; the sales transaction between Seller and Purchaser and the mortgage transaction between Lender and Borrower (who is also the purchaser). These transactions must occur simultaneously because the purchaser must borrow the money from the lender in order to pay the seller in exchange for the deed, but the purchaser must acquire the deed in order to give the lender a mortgage in exchange for the loan!                             

The Sales Transaction

At the closing, the sales transaction portion requires the “execution and delivery” of a deed from the seller to the purchaser, along with the necessary governmental forms required in order to record the deed and the simultaneous payment of the balance due, pursuant to the contract of sale, from the purchaser to the seller. In actuality, however, the original deed is given to the title closer, a representative of the insurance company that insures the lender that their mortgage is valid, and the buyer only receives a copy of the deed. The buyer, in turn, will often be asked to pay the balance due to the seller, by providing the seller with official bank checks payable to various third parties at closing and deducting them from the amount due to the seller. Since most banks refuse to accept third-party checks, and the seller must often satisfy a variety of obligations “at the closing,” having the checks issued directly to the third party and delivered to the seller allows him/her to do so. 

The title closer is often the most important person at the closing as he/she is a representative of the title insurance company that is insuring both the purchaser as to his/her ownership and the lender as to the validity and priority of its mortgage. If the title closer is not satisfied with the deed or any other instruments provided at closing, he will call his office for instructions as to how to proceed. If the company refuses to insure against a particular “risk,” the lender will not lend, the purchaser will not buy and, if the title insurance company cannot be persuaded to omit the matter excepted from coverage, the closing will have to be adjourned! 

The title closer is compensated very nominally by the title insurance company but receives a “gratuity” from the purchaser for attending the closing and recording the deed. While technically voluntary, not tipping the title closer is like not tipping a waitress in a restaurant and is considered inappropriate, barring extraordinary circumstances. In fact, “tipping” the title closer is so expected that some title closers will present the purchaser with an invoice at the closing for their “attendance fee”! Additionally, the title closer will be paid at the closing by the seller for arranging to satisfy any “liens” on the property, such as mortgages or judgments. The seller’s attorney will provide the title closer with a “Payoff Letter” obtained from the lienholder and an official check from the closing proceeds payable to the lienholder in the amount set forth in the payoff letter, and the title closer will “omit” that lien as an “exception” in the title report. After the closing, the title closer will deliver the official check to the lien holder and obtain a Satisfaction which the title company will record. For this service, the title closer charges the seller a “pick up fee” for delivering the check and “picking up” the Satisfaction to record. 

The Mortgage Loan Transaction

The mortgage loan transaction portion of the closing requires the borrower (who is also the buyer) to sign the mortgage documents, as well as the TILA RESPA Integrated Disclosure (TRID) documents, which provide a detailed itemization of all fees and costs being paid at the closing.  (Effective October 3, 2015, the TRID documents replaced the RESPA and Truth in Lending Disclosures.)  

All of these loan documents must be signed by the borrower and many are, typically, notarized by the title closer. Some lenders will require certain documents, such as the Note and Mortgage, to be initialed on each page as well, and there will be an abundance of “junk forms” verifying your name, address, an affidavit that you have been known by no other name for the past ten (10) years, an agreement to “cooperate” in correcting any errors that may have been made in any of the closing documents, etc.  

These “junk forms” are rarely, if ever, objected to, and experienced lawyers know that lenders do not make changes to their residential mortgage documents at closings. Upon execution (signing and having your signature notarized) and delivery of all required documents to the lender, as well as delivery to the purchaser of the deed, transfer forms and any other documents necessary to complete the transfer of title, the title insurance company insuring the mortgage will deliver its Loan Policy to the lender, and the lender will then, and only then, disburse the mortgage proceeds as directed by the purchaser’s attorney.                       

Finally, there may be one or more real estate brokers attending the closing. They have no official role and are there simply to “assist” should any last-minute problems arise, as they have a large commission at stake. They can, however, be very helpful should a last-minute inspection of the property reveal damage or any condition that the parties dispute existed at the time of contract.                

If you have questions, please contact me at peter.roach@roachlawfirm.com

Peter Roach

Peter T. Roach & Associates, P.C.

peter.roach@roachlawfirm.com